Substantive discussions between Prime Minister Narendra Modi and the Iranian President, Hassan Rouhani, during his three-day visit to Delhi in mid-February have taken Indo-Iranian relations to a higher level. Nine agreements were signed on such issues as avoidance of double taxation, Chabahar, terrorism and so on. The two sides exchanged instruments to ratify an Extradition Treaty signed in 2008.

However, it is the agreement relating to Chabahar that was the highlight of Rouhani’s visit. Under this deal, India will lease the Shahid Beheshti Port at Chabahar for a period of 18 months. India has committed $85 million towards developing Chabahar port, strategically located just 90 km from Pakistan’s Gwadar port, which is being operated by a Chinese company. It was only a few months ago that India began using Chabahar port to ship wheat to Afghanistan, providing a boost to its overland trade with Afghanistan, Central Asia and beyond. India and Iran have now taken their cooperation to the next level. With India now operating a part of Chabahar port, it has a stronger presence at the mouth of the Straits of Hormuz, through which much of India’s oil from the Gulf passes.

The operationalisation of Chabahar port, west of the Gwadar port developed by China, after Indian ratification ofthe International Road Transport (TIR) convention is going to be a game-changer in IndiaAfghanistan-Iran relations. In the next three years, India is committed to laying a 600-kilometre railroad from Chabahar port to Zahedan, which will provide seamless export of Indian goods and humanitarian assistance to Afghanistan via the ZalranjDelaram
axis without interference from Pakistan.

Zalranj in Nirmuz is connected to Chabahar while Delaram in Farah province has access to the Herat-Kandahar highway in Afghanistan. That Pakistan will do its utmost to play spoilsport is evident from the fact that Taliban looted two
of the 25 containers of wheat, sent to Afghanistan from Kandla port last October, near Mazar-eSharif.

The development of Chabahar port with the trilateral trade and transit agreement between India-Iran-Afghanistan will also open the international northsouth transport corridor all the way up to Central Asia, Russia and Europe. If India presses the accelerator and delivers on time, this route has the potential to rival the Chinese one-belt-oneroad (OBOR) initiative. Time is of the essence as it took 15 years for India and Iran to operationalise the Chabahar port after it was first proposed during the NDA dispensation under Atal Behari Vajpayee. While New Delhi put the project on the backburner due to its impact on international sanctions against Tehran at that time, the latter also proceeded slowly on the basis of its own priorities.

During President Rouhani’s visit, there were positive developments towards India having a stake in the “Farzad B” gas field in the Persian Gulf. With the Iran-Pakistan India pipeline not working out due to Islamabad’s intransigent attitude, the other option is to have a deep-sea pipeline via Chabahar or Bandar Abbas to Kandla port in Maharashtra to extract natural gas from Iran.

From the Indian perspective, apart from Chabahar and the trade corridor, the Iranian President’s visit is also a part of New Delhi’s efforts towards bridging the Shia-Sunni divide in West Asia. Before he hosted President Rouhani, Prime Minister Modi cemented ties with the UAE and Oman. India’s relations with West Asia will get an impetus when King Abdullah of Jordan arrives in New Delhi on February 28.

India-Iran-Afghanistan MoU and plans have committed at least $21bn to the ChabaharHajigak corridor, including $85m for the development of Chabahar port by India, $150m line of credit by India to Iran, $8bn India-Iran MoU for Indian industrial investment in Chabahar Special Economic Zone, $11-billion Hajigak iron and steel mining project awarded to seven Indian companies in central Afghanistan, and India’s $2bn commitment to Afghanistan for developing infrastructure including the Chabahar-Hajigaj railway, with the potential for more trade via connectivity to 7,200-km-long multi-mode North–South Transport Corridor (INSTC) connecting to Europe and Turkey, R297 Amur highway and Trans-Siberian Highway across Russia, and planned Herat to Mazar-i-Sharif railway providing access to Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan. Chabahar Port also provides direct access to India’s Farkhor Air Base in Tajikistan. The Chabahar route will result in 60 per cent reduction in shipment costs and 50 per cent reduction in shipment time from India to Central Asia.

India and Iran first agreed to plans to further develop Shahid Beheshti port in 2003, but did not do so on account of sanctions against Iran. As of 2016, the port has ten berths. In May 2016, India and Iran signed a bilateral agreement in which India would refurbish one of the berths at Shahid Beheshti port, and reconstruct a 600-meter-long container handling facility at the port. The port is intended to provide an alternative for trade between India and Afghanistan. This port is 800 kilometers closer to Afghanistan than Pakistan’s Karachi port. The port handled 2.1 million tons of cargo in 2015 to be upgraded to handle 8.5 million tons by 2016, and to 86 million tons in the future.

In July 2016, India began shipping $150 million worth of rail tracks to Chabahar to develop the port container tracks and build $1.6 billion Chabahar Zahedan railway built by India’s Ircon International for which India pledged an additional $400 million and Iran allocated $125 million in December 2016, thus taking the total allocation to $575 million (out of $1.6 billion needed for the rail route) till the end of 2016.

The trilateral transit agreement signed by India, Iran and Afghanistan allows Indian goods to reach Afghanistan through Iran. It links ports in the western coast of India to the Chabahar port and covers the road and rail links between Chabahar and the Afghan border.

The bilateral agreement between India and Iran gives India the right to develop two berths of the Chabahar port as agreed in 2015 and allows them to be operated for 10 years by India Ports Global, a joint venture between Jawaharlal Nehru Port Trust and Kandla Port Trust, in partnership with Iran’s Aria Banader. India Ports Global has guaranteed handling of 30,000 TEUs by the third year of operations, and aims to eventually handle 250,000 TEUs.

The berths will be developed at a cost of $85 million over the course of 18 months. Under the agreement, India Ports Global will refurbish a 640-meter-long container handling facility, and reconstruct a 600-meter-long container handling facility at the port. India Ports Global will modernize ancillary infrastructure by installing four railmounted “gantry cranes”, 16 rubber-tyre gantry cranes, two reach stackers, two empty handlers, and six mobile harbour cranes. India will also develop various industries, including aluminum and urea production plants, in the Chabahar economic zone attached to the port.

Iran’s ambassador to Pakistan, Mehdi Honardoost, stated that Pakistan and China had both been invited to contribute to the project before India, but neither China nor Pakistan had expressed interest in joining.

(The writer is retired Professor of International Trade. He can be reached at vasu022@gmail.com)